Taking a Personal loan in Singapore: Things to keep in mind

Personal loan in Singapore

We have all heard of personal loans. If you haven’t used personal loans to meet your needs, then you need to familiarise yourself deeply with the various aspects of a personal loan. In this article, we are going to give you complete information on things you should consider before taking a personal loan in Singapore.

What is a personal loan?

A personal loan is an amount of money you borrow from a bank or a licensed money lender in Singapore. You pay the loan back in monthly instalments over the agreed period. Personal loans are a method to obtain cash to meet needs that require amounts higher than the average monthly income. Almost everyone takes loans sometime or the other. Hence, as long as you have the capability and intention of paying back the loans, taking a personal loan is not a problem.

Quite often a personal loan in Singapore is often wrongly associated with loan sharks and bad habits. However, there are many other reasons for you to take personal loans. For instance, you might take a personal loan to pay for your wedding. Or if you are in a relationship, then you might take your partner on a vacation. As a student, you might take a personal loan to pay for college fees. In some cases, people take personal loans to pay for emergency needs and even credit card bills.

Having said that, let’s now take a look at the things you need to keep in mind before taking a personal loan in Singapore:

Personal loan interest rates: The most important thing to know about personal loans in Singapore is to understand the personal loan interest rates. Typically, you should go for a loan that offers the lowest personal loan rates. There are two terms that you must carefully understand – Applied Rate (AR) and Effective Rate (ER).

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In AR it is assumed that the loan principal remains the same throughout the loan period, and any reduction in the principal consequent to each repayment is not considered.

ER refers to the actual amount you repay when you make timely payments. In this calculation, the principal gradually reduces with each monthly repayment.

You must go for a loan that offers you the lowest personal loan rates as it puts less burden on your pocket and makes repayments easier.

The purpose of the loan: There are plenty of money lenders and banks in Singapore that will give you a personal loan, but, before taking a loan you must carefully think about how you will use it.

If you have a genuine need and reliable means of repayment then you should not hesitate in taking a personal loan in Singapore, but, if you just want to take the loan because it is offered to you (as a lot of people actually do) then you might be inviting trouble.

Add-on costs and charges: Quite often banks and financial institutions charge fees that are separate from personal loan interest rates. For instance, there are some banks that charge a fixed annual fee over and above the rate of interest. A late payment fee is another factor to be carefully considered as you will be levied the same whenever you miss a payment or pay less than the actual payable amount by the due date.

Your loan limit: There are various factors taken into account by banks before lending you a personal loan in Singapore. Usually, these include your relationship with the bank, your credit score, loans you might already have, and your monthly income. Different banks might give you different loan limits and you should find out about your options before taking the loan.

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Lender’s reputation and ethics: At times an urgent need can make you desperately seek a loan. However, it is important to borrow from reliable and professional lenders who are fully transparent. Loan sharks are often a source of personal loans in Singapore and you must avoid them. You can identify them easily as they might offer larger loans without verifying your credit history.

Impact on your credit score: Every loan you take reflects on your credit score. While a good repayment record boosts the score, defaults or delays in repayment can reduce your chances of getting future loans or even credit cards.

Affordability of repayments: Sometimes you might be offered a higher limit which would also mean a higher monthly repayment amount. Therefore, before jumping on to the amount on offer, you must carefully calculate how much you exactly need, and what is the amount that you can comfortably repay every month. Borrowing the loan and failing to make timely repayments can have serious implications.


One of the best ways to raise funds is to take a personal loan in Singapore. However, personal loans work best only when you get the lowest personal loan rates and are capable of comfortably repaying the loan. Being careful and going through all the details related to the personal loan can make it a viable option for you.

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